Strayer University, Washington DC ACC 403, Final Exam, 1,2 Chp-9-13,14-17 & 21&24

1. The most important general ledger account included in and affecting several cycles is the: (Points : 10)
       cash account.
       inventory account.
       income tax expense and liability accounts.
       retained earnings account.
2. The detail tie-in is part of the_______ assertion for account balances. (Points : 10)
       classification
       valuation and allocation
       rights and obligations
       completeness
3. Management assertions are: (Points : 10)
       implied or expressed representations about accounts, transactions, and disclosures in the financial statements.
       stated in the footnotes to the financial statements.
       explicitly expressed representations about the financial statements.
       provided to the auditor in the assertions letter, but are not disclosed on the financial statements.
4. The occurrence assertion applies to _______. (Points : 10)
       presentation and disclosure matters
       classes of transactions and events during the period
       account balances
       proper classification of income statement accounts
5. The detail tie-in objective is not concerned that the details in the account balance: (Points : 10)
       agree with related subsidiary ledger amounts.

       are properly disclosed in accordance with GAAP.
       foot to the total in the account balance.
       agree with the total in the general ledger.

6. Which of the following statements about the existence and completeness assertions is not true? (Points : 10)
       The existence and completeness assertions emphasize different audit concerns.
       Existence deals with overstatements and completeness deals with understatements.
       Existence deals with understatements and completeness deals with overstatements.
       The completeness assertion deals with unrecorded transactions.
7. To be considered reliable evidence, confirmations must be controlled by: (Points : 10)
       a client employee responsible for accounts receivable.
       a financial statement auditor.
       a client’s internal audit department.
       a client’s controller or CFO.
8. Which of the following is not one of the major types of analytical procedures? (Points : 10)
       Compare client with industry averages.
       Compare client with prior year.
       Compare client with budget.
       Compare client with SEC averages.
9. The primary purpose of performing analytical procedures in the planning phase of an audit is to: (Points : 10)
       help the auditor obtain an understanding of the client’s industry and business.
       assess the going concern assumption.
       indicate possible misstatements.
       reduce detailed tests.
10. The Auditing Standards Board has concluded that analytical procedures are so important that they are required during: (Points : 10)
       planning and test of control phases.
       planning and completion phases.
       test of control and completion phases.
       planning, test of control, and completion phases.
11. Which of the following is not a correct combination of terms and related type of audit evidence? (Points : 10)
       Foot – reperformance.
       Compare – documentation.
       Vouch – documentation.
       Trace – analytical procedures.
12. Which of the following statements regarding analytical procedures is not correct? (Points : 10)
       Analytical tests emphasize a comparison of client internal controls to GAAP.
       Analytical procedures are required on all audits.
       Analytical procedures can be used as substantive tests.
       For certain accounts with small balances, analytical procedures alone may be sufficient evidence.
13. Which of the following normally signs the engagement letter for an audit of a public company? (Points : 10)
       Corporate treasurer.
       Chief financial officer.
       Chairman of the board of directors.
       Audit committee.
14. Which of the following is not likely to be a related party? (Points : 10)
       Affiliated companies.
       A major stockholder of the company.
       A warehouse employee.
       The chief executive officer.
15. An engagement letter sent to an audit client usually would not include a(n): (Points : 10)
       reference to the auditor’s responsibility for the detection of errors or irregularities.
       estimation of the time to be spent on the audit work by audit staff and management.
       statement that management advisory services would be made available upon request.
       reference to management’s responsibility for the financial statements.
16. Which of the following statements is not correct with respect to analytical procedures? (Points : 10)
       Auditing standards emphasize the need for auditors to develop and use expectations.
       Analytical procedures must be performed throughout the audit.
       Analytical procedures may be performed at any time during the audit.
       Analytical procedures use comparisons and relationships to assess whether account balances appear reasonable.

17. Which of the following is correct with respect to a company’s corporate charter? (Points : 10)
       The corporate charter is granted by the federal government and is required to recognize the corporation as a separate entity.
       The corporate charter includes the rules and procedures used to operate a corporation.
       The corporate charter includes the exact name of the corporation, the date of incorporation, and the types of business the corporation is authorized to conduct.
       The corporate charter must be annually reviewed by the PCAOB.
18. The first standard of field work, which states that the work is to be adequately planned and that assistants, if any, are to be properly supervised, recognizes that: (Points : 10)
       early appointment of the auditor is advantageous to the auditor and the client.
       acceptance of an audit engagement after the close of the client’s fiscal year is generally not permissible.
       appointment of the auditor subsequent to the physical count of inventories requires a             disclaimer of opinion.
       performance of substantial parts of the examination is necessary at interim dates.
19. One accounting issue that does not require management to use significant judgments is: (Points : 10)
       the allowance for doubtful accounts.
       the useful life of equipment for tax purposes.
       obsolete inventory.
       the liability for warranty payments.
20. Acceptable audit risk is ordinarily set by the auditor during planning and: (Points : 10)
       held constant for each major cycle and account.
       held constant for each major cycle but varies by account.
       varies by each major cycle and by each account.
       varies by each major cycle but is constant by account.
21. If planned detection risk is reduced, the amount of evidence the auditor accumulates will: (Points : 10)
       increase.
       decrease.
       remain unchanged.
       be indeterminate.
22. When discussing control risk (CR) and the audit risk model, which of the following is false? (Points : 10)
       CR is a measure of the auditor’s assessment of the likelihood that misstatements will not be prevented or detected by internal control.
       If the auditor concludes that internal control is completely ineffective to prevent or detect errors, he/she would assign a low value (e.g., 0%) to CR.
       The relationship between control risk and detection risk is inverse.
       The relationship between control risk and evidence needed to support account balances is direct.
23. When setting a preliminary judgment about materiality: (Points : 10)
       more evidence is required for a low dollar amount than for a high dollar amount.
       less evidence is required for a low dollar amount than for a high dollar amount.
       the same amount of evidence is required for either low or high dollar amounts.
       there is no relationship between it and the dollar amount of evidence needed.
                                 
                                 
Chapter 13

24. To what extent do auditors typically rely on internal controls of their public company clients? (Points : 10)
       Extensively
       Only very little
       Infrequently
       Never
25. A procedure designed to test for monetary misstatements directly affecting the correctness of financial statement balances is a: (Points : 10)
       test of controls.
       substantive test.
       test of attributes.
       monetary-unit sampling test.
26. Tests of transactions are used to determine whether ___________ have been satisfied. (Points : 10)
       compliance test requirements.
       balance coverage requirements.
       transaction-related audit objectives.
       existence assertions
27. When the auditor finds that there are missing controls in an area of the accounting system, the audit program in that area would be modified in such a way as to: (Points : 10)
       increase the amount of tests of controls.
       increase the reliance on tests of controls.
       cause the issuance of a qualified or adverse opinion.
       eliminate the need for a test of controls.
28. Which of the following is not appropriate for purposes of testing the effectiveness of controls? (Points : 10)
       Make inquiries of client personnel.
       Evaluate prior experience with the client.
       Observe control-related activities.
       Reperform client procedures.
29. The primary emphasis in most tests of details of balances is on the: (Points : 10)
       balance sheet accounts.
       revenue accounts.
       cash flow statement accounts.
       expense accounts.
30. The most important consideration in developing the audit plan and audit program is the: (Points : 10)
       client’s size.
       client’s industry.
       audit firm’s available personnel.
       the audit risk model used in its planning form.

Strayer University, Washington DC ACC 403 Final Exam 1 Chp. 9-13

  
Course Auditing I
Test Final Exam Part 1

 Question 1
6 out of 6 points
 
  If an auditor believes the chance of financial failure is high and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely:
   
 Question 2
6 out of 6 points
 
  The preliminary judgment about materiality and the amount of audit evidence accumulated are ________ related.

 Question 3
6 out of 6 points
 
  Auditors generally allocate the preliminary judgment about materiality to the:

 Question 4
6 out of 6 points
 
  Auditors are ________ to document the known and likely misstatements in the financial statements under audit.

 Question 5
6 out of 6 points
 
  An auditor who audits a business cycle that has low inherent risk should:

 Question 6
6 out of 6 points
 
  When one material weakness is present at the end of the year, management of a public company must conclude that internal control over financial reporting is:

 Question 7
6 out of 6 points
 
  An audit procedure that would most likely be used by an auditor in performing tests of control procedures in which the segregation of functions and that leaves no "audit" trail is:

 Question 8
6 out of 6 points
 
  Which of the following is responsible for establishing a private company's internal control?

 Question 9
6 out of 6 points
 
  Internal controls normally include procedures designed to provide reasonable assurance that:

 Question 10
6 out of 6 points
 
  Internal controls:

 Question 11
6 out of 6 points
 
  Financial statement manipulation risk is arguably present for all companies' financial statements. However, the risk is elevated for companies that:

 Question 12
6 out of 6 points
 
  Which of the following is not a factor that relates to opportunities to misappropriate assets?

 Question 13
6 out of 6 points
 
  Two of the most useful warning signals that can indicate that revenue fraud is occurring are:

 Question 14
6 out of 6 points
 
  In the fraud triangle, fraudulent financial reporting and misappropriation of assets:

 Question 15
6 out of 6 points
 
  Which of the following is a factor that relates to incentives to misappropriate assets?

 Question 16
6 out of 6 points
 
  The audit approach in which the auditor runs his or her own program on a controlled basis to verify the client's data recorded in a machine language is:

 Question 17
0 out of 6 points
 
  Auditors should evaluate which of the following before evaluating application controls because of the potential for pervasive effects?

 Question 18
6 out of 6 points
 
  Which of the following is a component of general controls?

 Question 19
6 out of 6 points
 
  General controls may include firewalls which are used to protect from:

 Question 20
6 out of 6 points
 
  An internal control deficiency occurs when computer personnel:

 Question 21
6 out of 6 points
 
  Analytical procedures:

 Question 22
6 out of 6 points
 
  In the context of an audit of financial statements, substantive tests are audit procedures that:

 Question 23
6 out of 6 points
 
  A system walkthrough is primarily used to help the auditor:

 Question 24
6 out of 6 points
 
  Which of the following audit tests is usually the least costly to perform?

 Question 25
6 out of 6 points
 
  Presentation and disclosure related audit objectives would be performed in which phase of the audit process?

Strayer University, Washington DC ACC 403 Final Exam 2 Chp. 14-17 & 21&24

 
Course Auditing I
Test Final Exam Part 2
 

 Question 1
 
  What critical event must take place before goods can be shipped in order to assure payment can be reasonably expected?
   
 Question 2

 
  When designing audit procedures, tracing of source documents to the customers subsidiary ledger and subsequently to the general ledger is done to satisfy what assertion?
   
 Question 3
 
  The audit procedure referred to as proof of cash receipts is particularly useful to test:
   
 Question 4
 
  When an employee who is authorized to make customer entries in the accounts receivable subsidiary ledger, purposefully enters cash received into the wrong customer's account that employee may be suspected of:
   
 Question 5
 
  A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the:
   
 Question 6
 
  One of the causes of nonsampling risk is:
   
 Question 7
 
  A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a:
   
 Question 8
 
  To determine if a sample is truly representative of the population, an auditor would be required to:
   
 Question 9
 
  When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use:
   
 Question 10

  Which of the following would have the least impact in determining sample size?
   
 Question 11
 
  When do most companies record sales returns and allowances?
   
 Question 12
 
  Analytical procedures:
   
 Question 13
 
  The audit procedure that provides the auditor with the most appropriate evidence when performing test of details of balances for accounts receivable is:
   
 Question 14
 
  Most tests of accounts receivable are based on what schedule, file, or listing?
   
 Question 15
 
  The two primary classes of transactions in the sales and collection cycle are:
   
 Question 16
 
  The appropriate assumption to make regarding the overall percent of error in those population items containing an error is:
   
 Question 17

 
  The method used to measure the estimated total error amount in a population when there is both a recorded value and an audited value for each item in the sample is:
   
 Question 18
 
  The auditor is concerned with the audited value rather than the error amount of each item in the sample when using:
   
 Question 19
 
  The allowance for sampling risk when no misstatements are found in the sample is:
   
 Question 20
 
  The most commonly used method of statistical sampling for tests of details of balances is:
   
 Question 21
 
  Which of the following is a significant audit concern related to the transfer of inventory from one location to another?
   
 Question 22
 
  A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the:
   
 Question 23
 
  In most manufacturing companies, the inventory and warehousing cycle begins with the:
   
 Question 24
 
  When determining the sample size for the number of items the auditor should count during the physical inventory:
   
 Question 25
 
  The inventory and warehousing cycle can be thought of as having two separate but closely related systems, one involving the actual physical flow of goods, and the other the:
   
 Question 26
 
  The standard letter of inquiry to the client's legal counsel should be prepared on:
   
 Question 27
 
  Auditing standards require the auditor to communicate all management frauds and illegal acts to the audit committee:
   
 Question 28
 
  A client representation letter is:
   
 Question 29
 
  At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the:
   
 Question 30
 
  Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements?